Business & Marketing KOSSA Terms Review The Economy

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Business & Marketing KOSSA Terms Review
The Economy:
Economic Goods – something tangible like a car, clothes
Economic Services – something intangible like a haircut, carwash
Economic Resources – which are needed to operate a business: land, labor, capital (money, equipment),
entrepreneurship
Economy – is the way a nation makes economic choices about what, how, and for whom goods are produced.
Economic Utilities (value) are:
Time utility – having the product at a time/day convenient for the customer (open 24 hours, holiday items at good time)
Place utility – Having a product where customers can buy it (on-line, in a store, catalogs, etc.)
Possession utility – Offering several ways to possess the product (cash, credit, debit, check)
Information utility – giving customer information about product (displays, labels, brochures, videos)
Supply - amount of goods producers are willing to make and sell. Don’t want a surplus or shortage, want equilibrium.
Demand – customer’s willingness and ability to buy products. Higher demand typically higher price.
Price – the value placed on a product by the customer.
Economic Systems:
Capitalism – private ownership of businesses and marketplace competition (free/private enterprise – U.S.A)
Socialism – increased government involvement. Government runs key industries and try to provide employment.
Communism – The government runs everything. All people share common economic and political goals.
Market economy – Government lets the market answer what gets produced how and for whom.
Command economy – Government controls the factors of production.
Mixed economy – A mix of both market and command economy principles.
Factors that measure economic conditions of an economy:
Inflation – rising prices of products (higher prices, economy slows down; lower prices, economy grows)
Unemployment rate – how many people are working/unemployed
Gross domestic product – how many products are being made in our country
Government’s role in business:
Regulator – Making laws to protect the safety, health, and wellness of individuals and protect freedoms.
Provider of services – military, roads, bridges, police, education, libraries, Medicare, Medicaid
Supporter of businesses – Small Business Administration, establishing trade alliances, consumer of services
Competitor – Government owns the U.S. Post Office, Amtrak, and TVA (electric company)
Factors affecting a business’ risk:
Economic risks: changes in business condition – competition, government regulations, inflation, recession, etc.
Human risks: theft, breakage, injury, incompetence
Natural risks: tornadoes, fires, hurricanes, lightening, floods
Handling business risks:
Risk prevention and control – employee training, safe working conditions, prevention of theft (cameras, security
systems)
Transferring the risk – having insurance, warranties from manufacturer
Risk Retention – keeping small risks, uncontrollable risks
Risk Avoidance – anticipate risks in advance – market research, don’t make bad investments/purchases for business
Competition – Struggle between companies for customers
Price competition – focuses on the sale price of the product
Non-price competition – focuses on product quality, services, reputation, location, expertise, ect.
Productivity – Output per work hour measured over a period of time (how productive are employees?)
Social Responsibility of business in society – doing good things for your community through your business
Environmental issues: Recycling, not polluting the environment, conservation, ozone-safe, environmentally friendly
Ethical issues: guidelines for good behavior. Doing the right thing in business for the well-being of everyone.
Community involvement: Being involved in the community – Donating money/time to charities, other organizations.
Different types of business activities:
Market research – methods used to gather information, analyze it, and report to make business decisions
Financial analysis – being able to analyze a business’s financial statements.
Marketing – the process of developing, promoting, and distributing products to satisfy customers wants and needs.
Human resources – the process of choosing employees, retirement options, employee benefits
Explain the process of purchasing:
Information gathering:
Open- to-buy: Amount of money left for buying goods after all purchase received and on-orders have been considered.
Selecting suppliers : based on production capabilities, past experiences with them, special services and buying services
Buying methods:
Resident buying: retailer’s representatives in a central market give information to them about closeouts, special buys in
the market, merchandise offerings.
Centralized buying – Buying for all branches in a chain is done in a central location.
Decentralized buying – local store managers or designated buyers can make special purchases for their stores.
Net Sales = Gross sales of a company – sales returns and allowances (Example: $23,000 = $25,000 – $2,000)
Role of Management:
Planning: Deciding what will be done and how it will be accomplished.
Organizing: A coordinated effort to reach a company’s planning goals – assigning, staffing and directing employees.
Controlling: the process of comparing what you planned with actual performance – setting standards, evaluating
performance, and solving problems.
Types of Business Records:
Income statement: A summary of a business’s income and expenses during a period of time – shows if profit or loss.
Balance sheet: A summary of a business’s assets (building, cash, equipment) liabilities (debts – money owed) = owner’s
equity (new worth – what is the business worth)
Sales records: Files of customer purchases with addresses, amounts, dates, products, payment methods, returns and
other information constitute a rich trove of marketing data.
Employment records: Examples are: Any application for employment; Wage or salary history; Notices of
commendation, warning, discipline, or termination; Authorizations for a deduction or withholding of pay; Fringe benefit
information; Leave records; and Employment history with the employer, including salary and compensation history, job
titles, dates of promotions, transfers, and other changes, attendance records, performance evaluations, and retirement
record.
New employee orientation procedures:
A. Introduction: Introduce employee to co‐workers and other unit managers. B. Tour of Work Location
C. Discuss work schedule D. Time and Attendance (schedule) E. Explain how the department, co‐workers and employee
contribute to the mission of the business. F. Duties/Performance/Evaluation. G. Employee Development - Explain how
the employee will be trained. H. Safety Procedures Explain the safety procedures that are applicable to the
Types of business ownership:
Sole proprietorship – only one owner, most liability (risk)
Partnership – two or more people responsible for a business (someone to share risk and decision-making)
Corporation – a business that is chartered by a state and legally operates apart from the owner or owners (sells stock)
Channels of Distribution:
Direct channels – no intermediaries, from the manufacturer/producer to customer (farmer sell directly to customer)
Indirect channels – using intermediaries to get product from manufacturer to customer such as wholesaler, retailer, etc.
Manufacturer (TTAI) – makes the product
Wholesaler (Modern Vending) – buys from the manufacturer, stores the product, resells product to the retailer
Retailer (Wal-Mart) – sells product to the customer
Distribution intensity:
Exclusive distribution – protected territories for distribution of a product in a given geographic area only so many
McDonalds allowed in an area.
Selective distribution – a limited number of outlets in a geographic area can sell the product. Want to maintain an
image. Selling Ralph Lauren products only in higher-end stores.
Intensive distribution – involves the use of all suitable outlets to sell a product. Selling toilet paper in all stores that sell
it.
Invoices/Receiving Process
Invoices – are bills for items that your business has received.
Invoices include the company’s name, current date, items received, cost of items, total amount owed with tax.
1. Receiving merchandise – usually merchandise received in the back area/side area of the building. A receiving record
explains what merchandise is received, name of the shipper, number of items delivered, shipping charges, etc.
2. Checking merchandise – Checking the quantity and condition of merchandise that was received
3. Marking merchandise – marking merchandise with selling price/ other information. Most common method – UPC
code.
Transportation systems most commonly used by businesses to transport merchandise:
Trucks – most common
Planes – most expensive, fastest
Ships – slower but relatively inexpensive
Railroad – reliable, hauls large items
UPS, Fed Ex – are express carriers
Storage of merchandise:
Commodity storage – used primarily to store commodities : agricultural products such as tobacco, cotton, or grain
Bulk storage – store products only in bulk form, such as chemicals and oil
Cold storage – Used more for perishable items such as fruits, vegetables, and frozen products
Types of Warehousing:
Distribution centers – a warehouse designed to speed delivery of goods and minimize storage costs – Wal-Mart
Distribution center (they keep products at centrally located distribution centers so Wal-Mart stores get quicker
Public warehouses – offers storage and handling facilities to individuals or companies. Available to anyone who will pay
for its use.
Private warehouses – a facility designed to meet the specific needs of its owner. Company owns private warehouse.
Marketing Research/Marketing Information
Marketing Information – information that can be used to help a business make better decisions about products to carry,
prices to charge, promotions to use, etc.
Ways to obtain data for market research is:
Surveys – asking questions to determine data a company wants to find out about
Interviews – personal interview, telephone interview, focus group, mall survey
Observations – Mystery shoppers, one-way mirrors, hidden camera, traffic counts, point-of-sale research
Target markets/Market Segmentation
Demographics – statistics that describe a population in personal characteristics such as age, gender, income, ethnic
background, education and occupation.
Psychographics – based on consumers social and psychological characteristics such as: people who like sports,
photography, cooking, etc. Businesses target people with different interests.
Geographics – based on where people live. Locally, regional, national, or globally. Example: People in Florida don’t
need snow skis.
Factors that affect pricing decisions of a business:
1. How much the product cost the business.
2. What the competition has and is charging for their products.
3. Economic factors such as inflation, taxes, supply and demand, etc.
Product development
Product Mix – All of the different products that a company makes and sells. It is based on the image of the business, the
wants of the market, and objectives of the company.
Ways to position a company’s products (to make different from competitors)
a. features and benefits – Rockport shoes positioned as comfortable shoes
b. price/quality – having different prices based on the quality; Ford Focus – economical compact, Ford Taurus as fullsize passenger, etc.
c. competition – creating an image that your product is superior to the competition
Branding of products:
Branding – is a name, term, design, or symbol used to identify a business or organization
Nike – brand, swoosh – trademark, Just Do It – slogan (all parts of branding)
Warranties/Guarantees offered on products:
Warranties – A promise or guarantee given to a customer that a product will meet certain standards.
Guarantees – Used for promotional phrases such as “money-back guarantee”, “results guaranteed”
Consumer Protection Agencies:
a. Federal Trade Commission – investigate deceptive and misleading business practices, like false advertising. Prohibits
unfair competition.
b. Better Business Bureau – The BBB also alerts the public to scams, reviews advertising, and assists when donating to
charity, also gives free business reliability reviews.
c. Consumer Product Safety Commission – monitors the safety of products on the market: They do recalls of unsafe
products.
Role of Promotion:
Promotion’s role is to persuade, inform, or remind people about a company’s products.
* Be able to identify the advantages/disadvantages of each type of advertising.
The promotional mix is made up of components of each of the following:
Advertising – any paid form of media such as radio, TV, billboards, direct mail, outdoor, etc.
Sales Promotion – short term incentives to stimulate customers to buy (coupons, rebates, contests).
Public relations/publicity – activities designed to create a favorable image toward a business or its products.
Personal selling – direct contact between a salesperson and a customer to sell a product.
Parts of a print advertisement are:
Headline – catches the reader’s attention (short saying)
Copy – information about the product/service, event (smaller print)
Illustration – picture that goes along with the product/service
Price – selling price of product
Signature – name, address, phone number, logo, etc. of company
Roles of financing
Businesses may try to obtain capital from a bank, loan agency, etc. to buy/expand their business.
A business may offer their customers store credit cards to pay for their purchases.
Math Skills needed in a business environment
Business calculations :
Mark-ups - are the difference between the price of an item and its cost. Example: Jeans cost $45 – $20 cost = $25
markup
Markdown – marking down merchandise (usually by a %).
Discounts – reduction in the price of a good or service sold to customers. Employee discounts, cash discounts, quantity
discounts
Sales calculations:
Sales tax – a fee placed on the sale of good and services (local and state sales tax – 6% in Kentucky)
Extensions – the result of multiplying the number of units by the cost per unit. 5 computers X $500 = $2,500
(extension)
Exchanges – merchandise brought back to be exchanged for other merchandise
Allowance - a partial return of the sales price typically because of a defect in the product.
Technology items involved in business
Word processing skills – use Microsoft Word to type documents such as letters, business plans, resumes
Presentation skills – Using Power Point as visual aids to do business presentations
Database Skills – use Microsoft Access to put data into database for storage
Basic Spreadsheet Skills – Use Microsoft Excel spreadsheets to record data and do charts, graphs, calculations, etc.
Search Engines – Google, MSN, etc. are used to locate web sites.
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